THE PSYCHOLOGY OF THE ENTREPRENEUR

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CHAPTER 4: METHODOLOGY

INTRODUCTION

This chapter focuses on the research methodology used in this study. It furnishes a detailed description of the measurement instrument, descriptive statistics on responses to the instrument, and the various statistical techniques used in the analysis of the data of the study. Keep in mind that the purpose of this study is to examine the relationship between corporate entrepreneurship and corporate performance in the South African Electrical Distribution Industry as stated in the management question: “Will Electricity Utilities that foster corporate entrepreneurial behavior outperform utilities that don’t?” The study will further investigate the relationship between corporate entrepreneurship (CE) and corporate performance in relation to the biographic variables measured in the instrument.

RESEARCH DESIGN

Cooper and Schindler (2001) summarizes the definitions of research design as ‘the blueprint for the collection, measurement, and analysis of data….’ and ‘the plan and structure of investigation so conceived as to obtain answers to research questions. The plan is the overall scheme or program of the research.’ The design for this thesis is thus focused on creating and executing a program to get answers to the research questions.
This research is designed as a formal causal statistical study with the objective of answering the research and management questions and to discover/define future research opportunities.

Methodology

Despite this being a formal study to test the hypotheses, an exploratory literature study, referred to in Chapters 2 and 3, and was first done to

  • Understand the management dilemma better.
  • Look for ways others might have addressed the management question.
  • Gather background information to help formulate investigative questions.
  • Identify sources for and actual questions that might be used as measurement questions.

Cooper and Schindler (2001) support the practice of an exploratory study of some intensity, preceding the formal study.
Once this phase was completed a first phase instrument was developed and possible subjects were identified and invited to participate in the validation of the instrument. After validation, data was collected from a non-random group of subjects using the Internet and a self-reporting instrument. This is an exploratory study in which it is envisaged to determine the influence of an entrepreneurial environment within a utility on the performance and success of that utility. (Cooper and Schindler, 2001:139). Correlation between these two main factors and demographical factors will also be established. It will also represent a cross-sectional study, presenting a “snapshot” of the South African electricity distribution industry with the focus on intrapreneurship and success.

Hypotheses

The primary focus of the study is to test the hypothesis formulated from the management question. This question revolves around EDI Management’s dilemma, on what they should do to improve their organization’s performance and chances of being successful both in the eyes of the consumer and of the owner. Many answers could be formulated but with the field of this study being focused on Entrepreneurship, it is hypothesized that:

  • H: Non-entrepreneurial Electricity Utilities do not perform significantly worse than Entrepreneurial Electricity Utilities. (µ non entrp = µ entrep)
  • Ha: Entrepreneurial Electricity Utilities perform significantly better than Non-entrepreneurial Electricity Utilities. (µ non entrp < µ entrep)

From these hypotheses it is clear that the correlation between the entrepreneurial orientation and the success of electricity utilities will be tested. Correlation is a measure of the relation between two or more variables.
During the exploratory study for the development of the instrument it became clear that other propositions should also be set to guide the research. These are:

P1 South African electricity utility managers do not perceive their utility’s
strategies to be entrepreneurial.
P2 South African electricity utility managers do not perceive their utility’s
top-level decision making to be entrepreneurial.
P3 South African electricity utility managers do not perceive their utilities to
be financially successful.
P4 South African electricity utility managers do not perceive their utilities to
be socially successful.

From the above it is clear that the research instrument should therefore at least measure variables like profitability, growth, entrepreneurial environment, and entrepreneurial performance.

Measurement instrument

The measurement instrument developed by the researcher for this research consists of four sub elements. The first part of the instrument measures organization size and field of business. The second part is based on Morris’ instrument, and used with permission from Morris, measures an organization’s Entrepreneurial Performance Index (EPI) (Morris & Kuratko, 2002). The third part of the measurement instrument measures the organization’s performance and is based on performance variables that were previously used by Naman and Slevin (1993) and Beal (2000) in their research on success of organizations. The fourth part defines the demographical variables of the respondent.
Reliability, or the degree to which the instrument supplies consistent results, is tested by means of the Cronbach’s alpha technique.

Measuring Entrepreneurial Orientation

The EPI instrument measures the organization’s entrepreneurial orientation.
The EPI is designed to measure the following constructs:

  • Company orientation
  • New product/service/process introduction
  • Key business behavioural dimensions.

This is done with 18 five-point Likert type questions. The reliability and validity of the EPI instrument have already been established by Morris and Sexton (1996: 9) but is confirmed in this study by Cronbach’s alpha indicating high alpha levels.

Measuring Success (Performance)

Based on the research on success of organizations by Naman and Slevin (1993) and Beal (2000) thirteen variables are used to measure the performance construct. Three of these variables are profitability indicators (revenue, return on revenue, and return on assets). The three other variables are growth indicators (growth in revenue, growth in profits and growth in employment). Respondents are asked to indicate how satisfied they are with the performance of their firm vis-à-vis competitors along each of the six performance measures. A five-point Likert scale ranging from very unsatisfied (1) to very satisfied (5) is used for that purpose. Again the reliability and validity of the instrument is tested using the Cronbach’s alpha technique.

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Control Variables

Control Variables: Firm size and firm age is included as control variables to account for alternative explanations. The total number of employees in the firm will measure firm size. Firm size is included as a control variable because small ventures may be more amenable to the speed and flexibility required of entrepreneurship.
However, smaller firms may lack the resources needed to sustain entrepreneurship. Firm age is measured by the number of years the respondent had been in the present position. Younger firms may exhibit more EI in their desire to achieve full capacity. It is also necessary to control for the age of the firm since the performance measures used in the study are chiefly growth and business volume.

 Demographics

The demographical variables define the demographics of each respondent and will be used to analyze the correlation of these independent variables and the dependent variables established through factor analysis.

Tests and expected results

The literature study further indicated that most of the questions in the instrument will result in ratio data and that these results would need to be correlated in order to make some inferences on the subject matter. The research data was first summarized and described through Descriptive Statistics. In order to establish whether the number of variables could be reduced, Factor Analysis was then done. Following this, statistical processes were applied to make an Inference from the data and analysis results. These processes are:
Chronbach’s Alpha test
to test the probability of a Type I error set at α = 0.05 for this study
Principle component analysis
to calculate the eigenvalues for new variables
Kaiser Criterion test
to determine optimum number of factors
Scree test
to validate the number of factors
Factor loading, communality and rotated factor loading
to determine association of original variables with new factors;
Factor correlation
Factor score covariance
Pearson Chi-square test
for determining the significance of the relationship between categorical variables;
Correlation Coefficient (Spearman’s Rho)
to measure the linear relationship between variables;
Analysis of Variance (ANOVA)
Least Squares Means used in this study Used for hypothesis testing and inference.

Testing and implementation

The instrument was developed; tested for external – and internal validity; tested for reliability and then pilot tested to ensure practicality. The instrument was refined and then it was distributed to an estimated 680 role players in the South African electricity utilities.
The responses were tested for consistency and finally the results were analyzed in order to reject or not reject the different hypotheses and propositions. If the alternative hypothesis is accepted (as expected from the literature study), comparison measures are constructed and analyzed separately by linear regressions. The role of analysis of variance (ANOVA) is to provide an overall assessment of the strength of the evidence about all comparisons, while taking into account that they are correlated.
CHAPTER1   BACKGROUND AND ORIENTATION TO THE PROBLEM
1.1 INTRODUCTION
1.2 THE MANAGEMENT DILEMMA
1.3 MANAGEMENT QUESTIONS
1.4 RESEARCH QUESTIONS
1.5 RESEARCH OBJECTIVES
1.6 IMPORTANCE/BENEFITS OF THE STUDY
1.7 DESCRIPTION OF CONSTRUCTS
1.7.1 Corporate Entrepreneurship
1.7.2 Organizational Success
1.7.3 Organizational Demographics
1.8 RESEARCH DESIGN
1.8.1 Design
1.8.2 Hypotheses
1.9 METHODOLOGY
1.9.1 Measurement
1.10 THE STRUCTURE OF THE THESIS
CHAPTER 2 LITERATURE REVIEW: THE CLASSICAL THEORY 
2.1 INTRODUCTION
2.1.1 The Economists
2.1.1.1 Richard Cantillon (1680-1734)
2.1.1.2 Jean-Baptiste Say (1776 – 1832)
2.1.1.3 Joseph A Schumpeter (1883 – 1950)
2.1.2 The Behaviorists
2.1.3 Post 1980
2.2 THE ENTREPRENEUR IN FORMAL MODELS
2.3 THE PSYCHOLOGY OF THE ENTREPRENEUR
2.4 ENTREPRENEURSHIP – INTRODUCTION
2.5 THE CLASSICAL ENTREPRENEUR
2.5.1 Entrepreneurial personality
2.5.2 Entrepreneurial motivation
2.5.3 Creativity and Innovation
2.5.4 Creation, innovation and renewal within an existing organization
2.5.4.1 New business venturing
2.5.4.2 Innovativeness
2.5.4.3 Self-renewal
2.5.4.4 Proactiveness
2.5.5 Risk-taking
2.5.6 Entrepreneurial process
2.6 CORPORATE ENTREPRENEURSHIP
2.6.1 Corporate Entrepreneurial Orientation
2.6.2 Creativity and Innovation
2.6.3 Growth
2.6.4 Organizational structure
2.6.5 Controlling the entrepreneurial activity
2.6.6 Entrepreneurial culture
2.6.7 Creating the Venture’s culture
2.6.8 Measuring entrepreneurial performance
2.6.9 Reward systems
2.7 ENTREPRENEURSHIP AND MARKETING RELATIONSHIP
CHAPTER 3: LITERATURE REVIEW: APPLIED THEORY 
3.1 INTRODUCTION
3.2 CORPORATE ENTREPRENEURSHIP
3.2.1 The definition and culture of utilities
3.2.2 Management Strategies
3.2.3 The role of middle management
3.2.4 Changing the electricity industry
3.2.5 Measuring Corporate Entrepreneurship
3.3 THE ROLE OF ORGANIZATIONAL COMPENSATION SYSTEMS
3.4 SUCCESS
CHAPTER 4:METHODOLOGY 
4.1 INTRODUCTION
4.2 RESEARCH DESIGN
4.2.1 Methodology
4.2.2 Hypotheses
4.2.3 Measurement instrument
4.2.3.1 Measuring Entrepreneurial Orientation
4.2.3.2 Measuring Success (Performance)
4.2.3.3 Control Variables
4.2.3.4 Demographics
4.2.3.5 Tests and expected results
4.2.4 Testing and implementation
4.3 DATA COLLECTION
4.4 PREPARATION OF THE DATA
4.5 DATA ANALYSIS
CHAPTER 5:RESULTS AND FINDINGS 
5.1 INTRODUCTION
5.2 DESCRIPTIVE STATISTICS
5.3 FACTOR ANALYSIS
5.4 CORRELATION
5.5 ANOVA
CHAPTER 6: DISCUSSION OF FINDINGS 
6.1 DESCRIPTIVE STATISTICS
6.2 FACTOR ANALYSIS AND ITEM ANALYSIS
6.3 THE RELATIONSHIP BETWEEN NON-ENTREPRENEURIAL ORIENTATION AND BIOGRAPHIC VARIABLES
6.4 THE RELATIONSHIP BETWEEN NON-ENTREPRENEURIAL ORIENTATION AND BIOGRAPHIC VARIABLES
6.5 THE RELATIONSHIP BETWEEN FINANCIAL SUCCESS AND BIOGRAPHIC VARIABLES
6.6 THE RELATIONSHIP BETWEEN SOCIAL SUCCESS AND BIOGRAPHIC VARIABLES
6.7 THE RELATIONSHIP BETWEEN ENTREPRENEURIAL ORIENTATION, NON- ENTREPRENEURIAL ORIENTATION, FINANCIAL SUCCESS AND SOCIAL SUCCESS
6.8 EVALUATING THE MAIN HYPOTHESIS
6.9 LIMITATIONS OF THE CURRENT STUDY
6.10 DIRECTIONS FOR FUTURE RESEARCH
CHAPTER 7:CONCLUSIONS AND RECOMMENDATIONS 
7.1 CLASSICAL ENTREPRENEURSHIP THEORY
7.2 APPLIED ENTREPRENEURSHIP THEORY
7.3 EMPIRICAL RESEARCH
7.4 SUMMARY
7.5 RECOMMENDATIONS
CHAPTER 8:REFERENCES
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